The Government, who has the resources and in-confidence data needed, has not seen fit to provide credible figures, leaving me to wonder where they stand.

LNP members keep espousing what should be completely discredited figures of "$90 billion" and "$100 billion" for the worst-case NBN Co project costs.

The NBN Co 2012 Corporate Plan is very conservative about growth and income forecasts. Every release of new NBN Co data has confirmed that actual take-up and consumer download volumes are running far ahead of the Corporate Plan.

The ALP has not highlighted this nor allowed NBN Co to release any high-growth scenarios to counter the "stress tests" on which the LNP Policy rests.

The ABS reports download volume growth rates of 50% per year and the CISCO VNI forecasts are 66% per year for the next five years.

The NBN Co plan assumes only 30% per year growth in download volume, while reducing volume charges by 19% per year, encouraging consumers to use more.

If either of these credible growth rates is realised, and the one constant with the Internet over 25 years has been surprisingly high, sustained growth, then the economics of the current NBN Co project will be very different, another point ignored by the ALP:

Break-even will be considerably earlier than 2033.

It won't take much for the NBN Co project to become self-funding for full Fibre.

With greatly increased revenues, if even current forecast growth rates eventuate, NBN Co will become much more competitive than current ADSL technologies encouraging higher & faster take-up rates and NBN Co can increase the rate of rollout and further increase revenue growth.

On credible forecasts, NBN Co will be returning Rivers of Gold to the Federal Government by 2021.

The LNP, obviously, will play down & ignore the prospects of their opponents.

But why isn't the ALP even talking about, let alone spruiking, the upside of their NBN Plan?

The claimed $17 billion CapEx savings require the LNP plan needs to build each VDSL service for -$540 (negative build costs) or for only one-third of usual estimates, $310, and pay Telstra nothing. The latest estimates by Telcos have been nearer $1,000 per service, fully deployed.

On top of the CapEx savings, the LNP is claiming they can operate a much older, more maintenance intensive network for 20-25% less.

The LNP plan requires timely co-operation by Telstra, never seen before. Yet there are no Risk Assessments or mitigation strategies in their plan to address this "Drop-Dead" project risk.

When Turnbull is questioned on the topic he is tight-lipped, offering only the cryptic and unenlightening response, "They will". He has never offered more than this, confirming that something much deeper is going on.

Despite their pivotal role in the project and the commercial ramifications flowing from a probable about-face in Government Policy in just fourteen weeks, Telstra has made no statement to the ASX on the LNP plan.

Using the $900 per VDSL service implied, but not actually stated, by the LNP, their CapEx can only save 10% of the build cost, ~$4 billion, for a service they admit is inferior and has limited life of 10-15 years, close to the current construction period.

Even if the Telstra costs are moved entirely to OpEx by long-term leasing, the 2021 project costs can be no more than 5-10% direct to the Federal Government.

The LNP Plan doesn't include additional householder out-of-pocket expenses over what any other NB NCo customer, Fibre, Wireless or Satellite, will pay.

This could mean that all customers will be charged a significant connection fee, a major policy point.

Correct project cost estimates would explicitly list hidden costs shifted to customers and include them in a Total Project cost, to allow true "Apples-and-Apples" comparisons:

The LNP seems to be claiming $450 per service savings for VDSL,

but additional Customer expenses will be more than this, given what Telcos are already charging.

Turnbull has claimed on air that VDSL2 modems will "cost $50", whereas the only ISP offering VDSL2 charges $160 on a pure-digital service.

The LNP plan includes a "no disruption" promise, meaning they cannot offer pure-digital VDSL service like the other three NBN Co Customer Access Networks, but a hybrid phone/DSL service exactly as is provided now.

NBN Co may mandate the use of Central-splitters in such a hybrid phone/FTTN network, requiring customers to arrange and pay for this themselves.

These cannot be DIY/self-install as they are on the Telco-side of the line.

Telstra standard charges for new phone or Bigpond "Ultimate"/"Velocity services requiring a technician visit are $300-$336.

The LNP Plan is silent on a critical point, nor has Turnbull ever answered the question:

Can a VDSL customer opt for an upgrade to pure-digitial service, with identical equipment to the other three Customer Access Networks?

All the other connection types include the installation, at no fee to the customer for standard installs, of an NTD (Network Termination Device) with associated Power Supply Unit (PSU), optionally with batteries. NTD's come with 2 Phone (UNI-V, or User Network Interface-Voice) and 4 Data ports (UNI-D).

These devices are the Telco interface and cannot be self-installed, a significant (>$300) professional fee will be incurred by someone.

To buy an NTD and PSU from a Telco or retail store will cost over $500.

The whole package would cost $750-$1,000 if provided by Telco's today.

Each of the ports can be provisioned independently and served by/billed a separate ISP/RSP if desired. This is very significant for Customers, Service Providers and Network owners, such as the Education Departments and Universities.

If a customer has already paid significant out-of-pocket expenses for a VDSL2 modem and Splitter, will they get a rebate for them?

Turnbull has stated, very clearly and on multiple occasions, that the copper network will be upgraded to full Fibre. This is not in the LNP Policy and its implementation problematic.

The timeframe suggested, usually in the context of Net Present Value (NPV) is 10 or 15 years.

Turnbull implies that with more advanced technology, this will be both much cheaper and more effective/efficient use of money. (Funds can be invested elsewhere until needed.)

The cost of electronics in the $1200-$1400 per service cost of GPON is only $300-$400. Most of the cost is on equipment, labour, testing and cable, none of which will decrease at all, or by much, in real terms.

We know from 30 years of PC's, that semiconductor costs don't drop much over time as new, higher-performance chips are released, soaking up Moore's Law savings.

At best, waiting 10-15 years will save $200, ~15%, but even that saving won't be realised. Real wages & cabling costs have risen much faster than this over the last 15 years. Waiting will increase, not decrease, the cost of FTTP.

The LNP has been silent on who would build this new replacement network for their VDSL/FTTN and how it would be funded, though it is inherent in their Policy, justifications and rhetoric.

The LNP have consistently stated they are ideologically opposed to Publicly funded Telecomms infrastructure works, especially the NBN.

The LNP have stated as part of their current NBN policy that they will allow and encourage competition for Telecomms infrastructure.

We know from both the 1995/6 HFC Cable TV roll-out and the post 2003 roll-out of ADSL2, that the large Telcos will aggressively compete leading to poor services, low coverage, high prices and much worse consumer outcomes.

The Fibre replacement for the LNP VDSL/FTTN network, based on the last 25 years of Telecomms in Australia, will be slow, expensive and fraught for consumers.

The issues of customer upgrades to FTTP via "co-funding" and "optional" full cost-recovery have been canvassed by the ALP. The LNP and Turnbull have not been forth coming in clarifying the actual costs or providing any certainty to Service Providers or Consumers.

Discussing these costs based on projections from the British Telecom broadband upgrade is speculation in the absence of any LNP statement.

The Government appears to have been working for the LNP: they've not challenged any of obviously manufactured estimates and fake figures, but have failed to release real data & estimates. The best response by the Minister for Communications has been to claim "it's all lies".

The Coalition Plan is to cover 9M services via a Fibre-to-the-Node (FTTN) network using VDSL2 with up to 2.8M services accessible via Fibre-to-the-Premises (FTTP) using GPON (Gigabit Passive Optical Networking). The rest of the NBN Co plan, Fixed Wireless and Satellite Customer Access Networks, CAN's, will remain the same. There may be more Fixed Wireless customers.

Whilst the Turnbull plan is very specific on the Capital Expenditure required (CapEx), $20.5 billion vs the $37.4 billion in the NBN Co 2012 Corporate Plan, it doesn't give any detail on how it's going to create those savings.

The only suggestion of its FTTN cost-model is "$900 per service" as an example for calculation.

The $17 billion can only be saved on the 9M VDSL services: an average of $1890 per service less.Which is sheer fantasy, as the deployment cost of FTTP services averages only $1350 each, with another $850 per service going to Telstra as compensation for disconnected Phone Services, for an average cost of $2200 per FTTP service.

To reduce costs by the amount claimed, VDSL services must cost less than $310 each, including construction and Telstra contractual payments.

Either Turnbull isn't going to pay Telstra at all, a major policy shift and an outstanding commercial negotiation, or has found a way to shift all the CapEx costs to OpEx (Operational Expenditure) via leasing/rental agreements.

Only that can't be... Not only do the Coalition claim a $17 billion CapEx savings, they claim a 20-25% reduction in OpEx.

Each of these claims requires a complete suspension of disbelief, but together they are impossible.

Despite this catastrophic logic error, Turnbull has never addressed this question nor has his credibility with the Media seemed to have suffered for it.

2 comments:

The simple reason that none of these - essential - questions are not answered is that there is no need to! When a policy is rolled out that is clearly only designed to placate nervous voters, and the party has no intent to actually go ahead with it, why try to answer questions that will clearly show it for what it is? The LNP have absolutely no intent of going ahead with this FTTN policy. Hockey, as the potential Federal treasurer, and Abbot himself, have made it crystal clear they do not believe in Government built communications networks. In addition, statements about a "budget emergency" are making sure that this (and other policies) can be ditched within weeks of being elected. This is, I believe, why Telstra have made no statement to the ASX. They can't. It will destroy the LNP credibility to announce that they already know that they will be asked to provide a communications upgrade on "behalf of the Government". Look at the body language when the policy was announced. It shows two people who are writhing with embarrassment; one (Turnbull) because he knows he is selling a lie and the other (Abbot) because he knows that Turnbull knows it is a lie!